Note on Concept of Material Scheduling or Routing

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INTRODUCTION

Store routine denotes the procedure relating to the materials control. Material scheduling or routing means the controlling the material significantly. Normally, it involves three processes in manufacturing concerns. They are as follows:

Purchasing materials

Store keeping

Issuing materials

Purchase of Materials

Purchase and purchase department

Materials are the major component for any organization since it affects the production, quality of products, price and sales. Thus, purchasing material includes the systematic process of materials. It includes the identification and the determination of material to be purchased, selection of the appropriate suppliers, sending the purchase order, materials to ensure that examination of materials is as per purchase order payment of bills. The purchasing department involved in the purchase of materials. The purchase procedures are mentioned below:

The purchasing department performs the following activities.

To avoid the materials regularly.

To purchase the qualitative materials in harmonized conditions.

To remove the over and under stocking of materials purchase the materials in economic order quantities.

Types of Purchase

There are two types of material purchase. They are mentioned below:

Centralized Purchasing

Centralized purchasing deals about the purchasing activities that are routed through only one department. To avoid duplication and overlapping procurements all purchase should be made by the purchasing department. In this system, all the other departments should send purchase requisitions to the centralized purchasing department to make timely and suitable purchases.

Advantages of Centralized Purchasing

Disadvantages of Centralized Purchasing

Since, all the materials required are purchased by the purchasing department, it is better to control on material purchasing activities.

Centralized purchasing might lead to a delay in a material purchase. Similarly, it might be time-consuming while sending materials to the concerned departments and units.

Centralized purchasing enables the favorable terms and conditions on material purchases. This is due to the bulk purchase of materials.

There is a high initial cost of the material under centralized purchasing due to bulk purchase.

It helps to build specialized skills and knowledge of materials since the qualified and experienced personnel are involved in purchasing activities.

It increases the road transportation cost of material and materials that are to be dispatched to the departments located away.

It helps to achieve uniformity in purchasing policies and practices.

Due to their different material requirements, it might lead to misunderstanding among the departments.

Decentralized Purchasing

In this purchasing system, there is no purchasing manager and has no right to purchase material for all department and section. So, decentralized purchasing means to purchase materials by all departments individually to fulfill their needs and the disadvantages of centralized department can be easily removed by the decentralized purchasing method. In this system, a material can be purchased by each department locally and separately.

Advantages of Decentralized Purchasing

Disadvantages of Decentralized Purchasing

In this system, purchasing can be made easily and quickly, hence the departments purchase the materials required by themselves.

A firm cannot get discount, transportation facility, credit facility etc. under decentralized purchasing due to the small quantity of purchase.

The investment in materials is low due to the purchase of material in low quantity.

It is not possible to have specialized service in each department.

This system achieves the advantage of the local purchase.

There is a high chance of misappropriation and misuse of material due to ineffective control.

There is a low possibility of loss and damage of materials.

Decentralized purchasing is costly due to separate administrative and accounting works.

Purchase Procedures

The purchase of material has certain procedure which is mentioned below:

1. Receiving purchase Requisition

Purchase requisitions are the first step of purchase procedure in receiving the file of requisition and receiving the purchase. It is a request made by various departments to the purchasing department for purchasing the materials. Such purchase requisition is verified by the chief of the concerned departments in which the details about the material like quantity, codes, etc. are mentioned. Here's the sample view of Purchase Requisition Form.

2. Selection of suppliers

The second step of the purchase procedure is the selection of the appropriate supplier. Tenders are invited to look for the possible suppliers, quotations or a tender has other terms and conditions related to the materials involves the price and quality. The form developed to get the required information regarding the materials to be purchased is called the tender form.

After analyzing the tender forms received from all the probable suppliers, an analysis is made to select the suppliers intending to supply the raw materials and materials at the low price and the most favorable conditions. Besides these, the financial soundness has to own the capacity to supply, reliability and continuity of the suppliers should consider selecting a supplier.

3. Sending Purchase Order

After selecting the suitable supplier, a purchase order is sent to get the needed materials. It is a request made to the supplier to send the materials as per the stated price and quantity. The specimen of a purchase order is as below.

Each purchases order are made in 5 copies. The first copy is set for the supplier, the second copy to the department or person demanding the purchase, whereas the third copy to the department receiving the materials, the fourth copy to the accounts department and the final copy is kept by the purchasing department itself.

4. Receiving and Inspecting Materials

The fourth step of a purchase procedure is to receive and inspect the materials sent by the supplier. It has to be sure and confident about the no loss or damage during the carriage whereas the materials are as per the purchase order.

After inspecting the material, a report is prepared and the first copy of such report is sent to the purchasing department, the second to the accounting department and the third to the department receiving the material. The specimen of an inspection form is as under:

Before storing the materials, a statement of the materials received is prepared which is called the goods receipt note in which the code, price, and quantity of the material are mentioned.

5. Verifying and passing bill for payment

This is the last process of purchase procedure. The final approval for the bill of materials to be paid to the suppliers the account section makes payment of the same.